Wondering About Credit After Bankruptcy? Tips For Financial Recovery

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Some people think that after you file for bankruptcy that they won't be able to qualify for any sort of credit for many years. Is this true? Would it be possible to purchase a car with an auto loan or get a mortgage for a house? I put together this blog to provide others with the information that I have worked hard to find. As I started the bankruptcy process, I was very worried about what it meant for my financial future. Fortunately, I have recovered and have learned a lot along the way. Hopefully, this information will prove helpful for you.

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Once your debt is discharged through bankruptcy, you may find yourself wondering what the next step should be. After the bankruptcy filing is complete, you'll need to start thinking about the long-term credit repair steps that you'll need to take. The best thing you can do is to take control of your credit right from the start. Here are some tips to help you manage your budget and rebuild your credit after bankruptcy.

Start with a Budget

The best way to get control of your spending is to create a budget. You'll want something you can follow so that you don't find yourself facing the same struggles again in the future. Take time to evaluate all of your expenses for the month, including tracking all of your spending over several months.

By doing this, you can see where your money is really going and how you can reduce that spending. Once you set a budget, including your recreational spending, make sure you stick to it. This will help to ensure that you meet your financial obligations.

Trade Your Plastic for Cash

One of the best things you can do when you're trying to control your spending is to shift from your bank debit card to physical cash. It's harder to grasp how much you are spending when you use the card. By paying in cash, you have a physical account of what you are spending each time.

Another advantage to paying with cash is that you can physically limit how much you spend when you go somewhere. By taking only the amount of cash that you have budgeted to spend, you can avoid the incidental splurges that can add up over time.

Make All of Your Payments on Time

When it comes to rebuilding your credit, the first place to start is with your monthly bills and your bank account. Make your monthly payments before the due dates and keep your bank account from being overdrawn. Both of these things will have a positive effect on your credit score.

This will also help you start building a positive history of payments. Every time you make a payment on time, it's reported to the credit bureaus and it reflects as positive activity. This will gradually help you increase your credit score and rebuild a solid payment history.

Apply for Credit

Before you can truly rebuild your credit score, you'll need to have an open credit account, such as a credit card or a line of credit. The first credit card that you obtain after bankruptcy is typically a secured card. This is a great place to start, because you have a limited credit balance for which you offer the deposit in advance. Keep your balance minimal and make more than the minimum payment every month to help improve your credit score.

Some local banks may even be willing to offer you a secured line of credit six months or a year following the discharge. These lines of credit typically require something of value as collateral, such as your home deed or car title. Once you have proven your creditworthiness with a secured line of credit and built a solid relationship with a local bank, you may even be able to look at financing for a car or a personal loan with a reasonable interest rate.

The key to recovering from bankruptcy without permanent damage to your credit report is taking an active role in rebuilding your credit. With the tips presented here, you can start taking the steps necessary to restore your credit score. Making educated financial decisions can play an important role in the process as well. You may want to talk with your bankruptcy attorney about other professional guidance for moving forward.